Tuesday saw stocks give back some recent gains as investors weigh the possibility of inflation and recession in the wake of Walmart cutting their sales forecast.
The SPX closed down 45 points to 3921. The NASDAQ closed down 220 points to 11,562.
Much of Tuesday action though may not mean much ahead of Wednesday’s Fed rate announcement. That could be the catalyst for the remainder of the week, up or down.
Let’s review the closing technical indicators from Tuesday to see what to expect for Wed Jul 27 2022.
Stock Market Outlook Chart Comments At The Close on Tue Jul 26 2022
The closing candlestick is bearish for Wednesday. It closed at the 50 day moving average which often is followed by a bounce. The index closed below the Upper Bollinger Band which is bearish.
The 21 day moving average is turning sideways which is bearish.
The Upper Bollinger Band is rising and is above the 50 day moving average which is bullish.
The Lower Bollinger Band is trending sideways, indicating the rally is slowing. The Bollinger Bands Squeeze appears to be pushing for higher stock prices, which is bullish.
All the moving averages are falling except the 21 day.
There are 4 down signals still in place and there have been no up signals since the start of April.
The chart is 70% bearish for Wednesday.
Stock Market Outlook review of Tue Jul 26 2022
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is unchanged and positive.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Monday June 27. On Tuesday the up signal weakened. The histogram is declining. Both are signs of weakness.
- Settings: For MACD Histogram, I am using the Fast Points set at 13, Slow Points at 26 and Smoothing at 9.
Ultimate Oscillator: The Ultimate Oscillator is falling.
- Settings: The Ultimate Oscillator settings are: Period 1 is 5, Period 2 is 10, Period 3 is 15, Factor 1 is 4, Factor 2 is 2 and Factor 3 is 1. These are not the default settings but are the settings I use with the S&P 500 chart set for 1 to 3 months.
Slow Stochastic: The Slow Stochastic has a down signal in place for Wednesday.
Settings: For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic tries to predict the market direction further out than just one day.
Relative Strength Index: The RSI signal is falling and back to neutral.
- Settings: The relative strength index is set for a period of 5 which gives it 5 days of market movement to monitor. It is often the first indicator to show an overbought or oversold signal.
Rate of Change: The rate of change signal is falling and and back to neutral.
- Settings: Rate Of Change is set for a 21 period. This indicator looks back 21 days and compares price action from the past to the present. With the Rate Of Change, prices are rising when signals are positive. Conversely, prices are falling when signals are negative. As an advance rises the Rate Of Change signal should also rise higher, otherwise the rally is suspect. A decline should see the Rate Of Change fall into negative signals. The more negative the signals the stronger the decline.
Support and Resistance Levels To Be Aware Of:
4200 is light resistance
4150 is light resistance
4100 is light resistance
4050 is light resistance
4025 is light resistance
4000 is strong resistance
3975 is light resistance and is a decline of 17.5%
3900 is light support and is a decline of 19%
3850 is light support and is a decline of 20%
3825 is light resistance.
3800 is good support.
3775 is light support
3750 is light support
3730 is light support
3700 is good support
3675 is light support
3650 is light support
3625 is light support
3600 is good support and is a decline of 25%
Stock Market Outlook for Tomorrow – Wed Jul 27 2022
For Wednesday the technical indicators are pointing to another lower day. Microsoft and Alphabet after hours reported earnings that did not meet estimates. The technical indicators are all pointing lower and are showing weakness has spread across much of the market.
Wednesday though will be all about the Fed’s decision on interest rate at 2:00 PM and the Fed’s news conference. Watch for a sharp rally in the half hour before the Fed announcement. It is widely expected that the Fed will raise rates 0.75%. A rate increase of 1% will surprise the market and send stocks lower.
Wednesday then is all about the Fed but the technical indicators are also advising that the rally has run into weakness.
Potential Market Moving Events
This is a very busy week with a number of market moving events including the next Fed funds rate increase due on Wednesday at 2:00 PM.
Tuesday:
9:00 S&P Case-Shiller national home price index came in at 19.7% down slightly from 20.6% previously.
10:00 Consumer confidence index was lower than expected coming in at 95.7 down from 98.4 and below forecasts of 97.
10:00 New Home Sales were 590,000, below forecasts of 660,000.
Wednesday:
8:30 Durable goods orders
2:00 Fed funds target rate
2:30 Fed Chair Powell news conference
Stock Market Outlook Archives
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